[HN Gopher] A Sober Look at SPACs (2020)
___________________________________________________________________
A Sober Look at SPACs (2020)
Author : cinntaile
Score : 105 points
Date : 2021-02-05 15:06 UTC (7 hours ago)
(HTM) web link (dx.doi.org)
(TXT) w3m dump (dx.doi.org)
| goat_whisperer wrote:
| I didn't know a great deal about SPACs, but it looks like the
| real winners are the initial Sponsors and IPO investors, while
| the losers are the suckers who pay shares after the SPAC merges
| with the target company.
|
| Let's examine how convoluted the SPAC process is. First, a SPAC
| raises money through an IPO that it will use to merge with a
| target company. Then, when the SPAC finds a target and proposes a
| merger, many of the initial IPO investors redeem their investment
| at a handsome guaranteed return....so then the SPAC has to go out
| and raise more money through private placements?!?
|
| What?! Isn't the whole point of the SPAC to raise funds to
| complete the merger?
|
| As a rule of thumb, the more convoluted things get in finance,
| the more nefarious the intentions
| DebtDeflation wrote:
| >As a rule of thumb, the more convoluted things get in finance,
| the more nefarious the intentions
|
| Many years ago, the quote I heard went something like, "There
| are only 3 real asset classes: Equities, Fixed Income, and
| instruments designed to make money for Wall Street.
| Colloquially known as Stocks, Bonds, and Bullshit."
| mnadkvlb wrote:
| Such an underrated comment !! +1
| [deleted]
| boh wrote:
| One of the worst aspects of a SPAC is that it's essentially a
| grab-bag purchase since even once you know the company being
| bought, you still don't initially know whether it's a good
| investment. This is true even if you're somewhat familiar with
| the business. 23andMe for instance, is currently SPACing, and
| though you might've heard about the company before, it's still
| unclear how profitable it really is or how much growth we
| should expect from it.
|
| S-1s really matter. WeWork is a perfect example of a seemingly
| successful company that was forced to reveal its failings
| before hitting the public market. If it SPACed instead, many
| investors would've likely bought it due to name recognition and
| found their money was now tied to a failing business model.
|
| To be fair, the typical IPO process doesn't have too much to
| admire either. It ironically leaves the public out of the
| actual initial offering, walling off much of the initial growth
| of the share price (unless it's a super-star stock which
| balloons once it hits the public market--which they rarely
| are). More companies doing direct sales is a welcome change.
| rorykoehler wrote:
| I don't know anyone who thought wework was on good financial
| footing.
| vmception wrote:
| it wasn't about good, it was about how bad
|
| many and possibly most employees were living in a delusion
| though, that was pretty funny because when I polled them,
| many didn't understand any of the financial meme lingo as
| wall street was making fun of wework for a whole year. So,
| they didnt get the jokes to even know it was a negative
| view.
| stainforth wrote:
| >walling off much of the initial growth of the share price
|
| Almost as if by design
| jsight wrote:
| > One of the worst aspects of a SPAC is that it's essentially
| a grab-bag purchase since even once you know the company
| being bought, you still don't initially know whether it's a
| good investment.
|
| Yeah, and you also don't really know if it will go through.
| What happens when a SPAC claims to be merging with the
| company but the deal never materializes?
|
| It feels like a weird system of gambling instead of investing
| in that sense.
| nostrademons wrote:
| SPACs usually have a clause in them that the money is
| refunded to the shareholders if it fails to complete an
| acquisition by a certain target date. The expenses of
| running the fund come out of the initial investment put up
| by the SPAC's sponsors, i.e. the folks who create the SPAC
| make the public investors whole and eat the losses
| themselves. This is why there's a de facto floor of $10 on
| pre-merger SPAC stock prices. In theory, it's a risk-less
| investment.
|
| In practice, the SPAC sponsor ends up acquiring a sub-par
| company and taking it public regardless. If they don't,
| they lose all of their initial investment, yet if they do,
| they have a chance of unloading the shares on the public
| markets before anyone finds out. I saw a bunch of these
| when combing though SPAC lists - funds that had < 6 months
| left on the clock take a chain of nursing homes public, or
| a chain of used-car dealerships, or other companies that
| had no business being on the public markets. Then there's a
| very strong incentive to juice the financials and hide the
| skeletons so they can get the merger past shareholder vote.
| Hence the reputation SPACs are getting as vehicles for
| fraud.
| jsight wrote:
| Oh, I hadn't realized that. I think the cases that I was
| thinking of were just rumors of future SPACs before an
| official confirmation:
| https://investorplace.com/2021/02/cciv-stock-no-imminent-
| luc...
|
| It seems like this leaves a lot of room for bad behavior
| by insiders.
| albertshin wrote:
| While I won't comment on your other points, I do want to
| correct you that many SPAC acquisition deals involve a
| lengthy investor presentation deck that shows
| historical/projected financials (which are then republished
| in a more typical/formatted SEC document closer to the proxy
| vote date of the merger).
|
| Here's 23&Me from the SEC website: https://www.sec.gov/Archiv
| es/edgar/data/1804591/000095010321...
|
| See page 34 for summary of financials.
| paxys wrote:
| I cannot believe this game hasn't been shut down by the SEC yet.
| rantwasp wrote:
| hahahah.
|
| yes, SEC needs to shut this down. it's right on their list
| after punishing hedge funds for shortselling shares that don't
| exist. /s
| thefreeman wrote:
| cmon man. it's been explained countless times how short
| interest could be over 100% without anyone short selling
| shares that don't exist. if you still don't understand it you
| are essentially hiding your head in the sand to try to deny
| reality.
| jtdev wrote:
| I'd love to see where this has been explained. I've not
| seen this anywhere.
| mikeyouse wrote:
| One such example:
|
| https://www.fool.com/investing/2021/01/28/yes-a-stock-
| can-ha...
|
| > _As an example, take a situation involving four
| investors. Annie owns shares of GameStop, and Annie and
| her broker have an agreement that allows the broker to
| lend Annie 's shares to short-sellers. It lends them to
| Bob, who subsequently sells those borrowed shares short
| in hopes that GameStop's share price will fall._
|
| > _An investor named Chris ends up buying those borrowed
| shares from Bob. However, Chris has no way of knowing
| that those shares have been borrowed from Annie. To
| Chris, they 're just like any other shares._
|
| > _More importantly, if Chris has the same kind of
| agreement, then Chris 's broker can lend out those shares
| to yet another investor. Diane, another GameStop bear,
| can borrow those shares and sell them short._
|
| > _In this example, the same shares end up getting
| borrowed and sold twice. The short interest volume these
| transactions add to the total is twice the number of
| shares actually involved. You can therefore see that if
| this happened throughout the market, total short interest
| would eventually exceed the number of shares outstanding
| and approach 200%._
| jtdev wrote:
| Okay, but this still seems like a perversion of market
| mechanics that should be regulated/banned.
| hntrader wrote:
| Sort of like fractional reserve banking?
|
| In practice it doesn't make a big difference whether it's
| banned or not. Stocks almost never have a short-interest
| above 100%, and the larger the short-interest the less
| attractive it becomes to join in so there's already
| negative feedback built in.
| Judgmentality wrote:
| > In practice it doesn't make a big difference whether
| it's banned or not. Stocks almost never have a short-
| interest above 100%
|
| Except it just happened? This is like arguing for not
| fixing a really weird state in code. "It's not supposed
| to be able to get into that state so we just ignore it."
| mrlonglong wrote:
| I'm definitely a geek at heart, I misread the title as a sober
| look at SPARCs!
| csours wrote:
| Has anyone seen a good explanation with graphics on how the money
| and dilution work for SPACs?
| cj wrote:
| Just one example of why SPACs need to be looked at from a
| regulatory perspective:
|
| https://www.cnbc.com/2021/02/05/chamath-palihapitiya-backed-...
|
| In short, Clover Health is going public via a SPAC, but never
| disclosed it was under investigation by the DOJ.
|
| > Clover said it decided it did not need to disclose the DOJ
| inquiries after consultation with its lawyers. The company did
| not say what the DOJ's inquiries were about.
|
| SPACs short-cut disclosure requirements, making it easier for
| companies to go public without the typical scrutiny that comes
| with the IPO process.
| optimiz3 wrote:
| Not long ago short sellers were claiming Tesla was in trouble
| with the DoJ over the Model 3. Ended up a big nothing; we don't
| know if there is any meat here.
|
| https://www.cnbc.com/amp/2018/11/02/tesla-says-doj-and-sec-a...
| cj wrote:
| Yes, very possible there is zero meat to the actual
| investigation. And very possible it's just the short seller
| pushing a narrative to drive the price down. But how do we
| know the truth when there are no disclosures?
|
| As an investor, you should have a right to be informed of
| investment risks.
|
| An active/ongoing DOJ investigation (even if routine) seems
| like something investors would need to be aware of to make an
| informed investment decision.
| woah wrote:
| Chamath first came to my attention last week when he introduced
| his run for California governor by promising to give everyone
| free money and cut taxes to zero. He then bought into GameStop
| stock, pumped it, and sold at the top while many gullible fools
| lost their life savings. What a shady dude.
| optimiz3 wrote:
| Chamath sold GME the day after the purchase and donated the
| proceeds. The purchase was announced on Twitter after
| soliciting a community investment idea. The sale was
| announced the following day on CNBC. Shady it was not, and I
| don't know how much more transparency you could want here.
| lupire wrote:
| He dumped the stock before the supposed short squeeze that
| was the alleged reason for the price runup.
| Svettie wrote:
| so what? Countless other people did the same thing, it's
| a public market.
| rorykoehler wrote:
| I invested in one of Chamath's SPAC plays (not because of
| Chamath). He is legit as far as I can tell. The company is
| solid, has an amazing hard tech product and everything has
| worked out great so far. I have no doubt that everything is
| honest and that the company will do amazingly well in the
| next decades. The founders have great track records. This is
| something like the 4th unicorn the CEO has created and gone
| public with or exited via buyout. I don't think he would
| choose to partner with Chamath if the guy was shady.
| hntrader wrote:
| Agreed on the shadiness. I think the GME pump wasn't a direct
| attempt by him to make money (since he donated proceeds), it
| was mostly a strategy to get publicity and align him with the
| retail investor crowd on social media so that his next SPAC
| gets pumped. He was able to pump his CLOV position 10% today
| for example, using a single Tweet.
| paulgb wrote:
| He also fanned the flames of outrage at Robinhood over PFOF,
| while SPACing a competitor who does the same things he
| critisizes Robinhood for.[1]
|
| Probably not illegal, but leaves a bad taste. I get the
| surface-level appeal of this guy's narrative (especially his
| CNBC appearences), but I don't get the idolatry towards him.
| He's not some sort of people's hero, he's just another rich guy
| who sometimes has cathartic rants about other rich people in
| order to get richer.
|
| [1] https://twitter.com/tysonbrody/status/1355967493089669131
| WanderPanda wrote:
| From my observations I think he has the gift of being utterly
| convincing in the way he speaks while also having a good
| track record. But only after listening a lot to him I started
| noticing, that the points he conveys of being the definitive
| true answer to something start contradicting other things he
| said earlier.
| lupire wrote:
| His track record is for making money, which isn't obviously
| good for anyone else
| _jal wrote:
| There is a category of person for whom wealth is social
| proof of being worth listening to. Doesn't matter how
| they got it, this type of person is simply attracted to
| wealth.
| optimiz3 wrote:
| A track record for making money is usually one of the
| first things people consider when evaluating who to
| invest along side of.
| dralley wrote:
| Sometimes seconds earlier. In his most recent viral
| interview, he went from "where was this (critical)
| attitude) in 2008?" to, in his very next sentence, "look
| who was right about Tesla? not the shorts."
|
| Guess what? For years and years and years, everyone thought
| "Wall Street" was right, because real estate prices kept
| going up and up and up and up. People who saw what was
| happening, like Michael Burry, took an absolute thrashing
| on their short positions for years because the market
| refused to correct itself, it just kept going up despite
| the problems becoming increasingly obvious.
|
| That is not obviously different from the Tesla situation.
| Chamath sounds like he's cheerleading the exact kind of
| narrative that he criticized Wall Street for not being
| critical of. And in any case it's not like the history of
| Tesla ended last week, so absolutist statements of "right"
| or "wrong" are nonsense.
| laughingman2 wrote:
| His narrative pushing feels nefarious to me. I think he is
| using his new tech podcast (all-in) as a new platform to
| build a image of a pragmatic do-gooder billionare (to
| whomever who would buy that shtick), spin a new narrative
| and test out few ideas like (remove capital gains tax, he
| running for governorship) for approval.
|
| If GME debacle taught us (again?) anything, it's that
| markets are moved by narratives. And those raccoons who
| control the narrative can move the market towards their
| favour.
|
| Great post on epsilon theory on this
| https://www.epsilontheory.com/hunger-games/
| Jommi wrote:
| https://www.youtube.com/watch?v=XHZl59B6Rc8
| sradman wrote:
| > A special purpose acquisition company (SPAC) is a "blank check"
| shell corporation designed to take companies public without going
| through the traditional IPO process.
|
| https://en.wikipedia.org/wiki/Special-purpose_acquisition_co...
| mooreds wrote:
| Marketplace did an deep dive into SPACs a few days ago:
| https://www.marketplace.org/shows/make-me-smart-with-kai-and...
|
| Seems like pure regulatory arbitrage to this guy.
|
| Edit: Bonus, it's also a pump and dump scheme!
| nicholast wrote:
| I'm reading this to imply that as a general rule of thumb, in
| recent times SPACs have been a better deal for the company going
| public than for the SPAC investors. That outsized returns exist
| but are not the norm.
|
| There was a good resource linked in one of the footnotes that is
| a much more concise summary: "SPAC Attack: everything a founder
| or investor should know" https://luttig.substack.com/p/spac-
| attack-everything-a-found...
| paulgb wrote:
| For a potentially more accessible version of this, Matt Levine
| wrote about the paper when it came out:
| https://www.bloomberg.com/news/newsletters/2021-01-08/money-...
|
| There's also a summary blog post here:
| https://corpgov.law.harvard.edu/2020/11/19/a-sober-look-at-s...
| benkoller wrote:
| The Matt Levine article is a great summary, thanks for sharing.
| bombastry wrote:
| It's worth noting that Matt Levine has a lot of other good
| writing on SPACs. (And economics in general. To anyone reading
| this comment, I highly recommend his daily newsletter "Money
| Stuff", which is where these excerpts come from).
|
| On how SPACs can end up giving more money to banks than IPOs:
|
| "But for another thing, a lot of people are dissatisfied with
| the process for selling stock; they think that investment banks
| make too much money and do not have issuers' interests at
| heart, and so they are looking for ways to sell stock more
| cheaply and to cut out the role of the investment banks. And
| the ways that they have discovered, the methods that they tout
| to cut out the middleman and free companies from the tyranny of
| Wall Street banks, all involve (1) hiring Wall Street banks and
| (2) paying them tons of money. It's so good!
|
| [...]
|
| Venture capitalists and SPAC sponsors sometimes suggest that
| this is a way to cut out Wall Street and avoid expense, but
| that is not true. Not only is the SPAC expensive because its
| sponsor--the person who sets up the shell company and searches
| for a target to take public--charges for her efforts, but the
| SPAC also has to pay banks to do its own IPO. And maybe to
| search for the target, execute the merger, and otherwise be
| around to provide banking services. And so, unsurprisingly,
| banks love SPACs.
|
| [...]
|
| This is really the kind of business you want to be in, the kind
| where (1) it is so lucrative that your customers are constantly
| complaining that you make too much money, but (2) when they
| want to disrupt your business, they come to you to disrupt it
| and pay you even more money."[1]
|
| Another article mentions that companies sometimes prefer
| merging with SPACs than having an IPO in volatile markets due
| to the uncertainty involved in an IPO:
|
| "Compared to an IPO, the SPAC is much less risky for the
| company: You sign a deal with one person (the SPAC sponsor) for
| a fixed amount of money (what's in the SPAC pool 2 ) at a
| negotiated price, and then you sign and announce the deal and
| it probably gets done. With an IPO, you announce the deal
| before negotiating the size or price, and you don't know if
| anyone will go for it until after you've announced it and
| started marketing it. Things could go wrong in embarrassing
| public fashion.
|
| In volatile times, that certainty is worth a lot more, so
| companies are looking for it.
|
| [...]
|
| There is a problem, a risk: Companies want to go public, but
| they are worried about the risk of the market collapsing. There
| is a solution, a holder of the risk: A SPAC will take a company
| public in a fully sold deal with a fixed price and size, so
| they don't have to worry about the market collapsing. There is
| a price: The SPAC doesn't take this risk because it is nice, or
| foolish; it takes this risk because it expects to make much
| more money than a typical IPO investor. In normal times, the
| risk is low, the compensation is low, and the tool is not used
| that much. In volatile times, the risk is high, the
| compensation is high, and people talk about SPACs a lot." [2]
|
| He then goes on to note that SPACs have their risks too,
| including the same kind of public embarrassment that an IPO can
| bring. The share-holders of the SPAC can vote against an
| announced merger, which happened last year when the investors
| of the SPAC Far Point decided against merging with the company
| Global Blue.
|
| "Ordinarily, in a public-company merger, if a board of
| directors changes its mind like this it needs to pay the other
| side a big termination fee, but SPACs are just pots of money
| held in trust for public shareholders so its harder to do that;
| the Far Point merger agreement has no termination fees. Just as
| in an IPO, the deal isn't really done until you get the cash,
| and while you're more likely to get the cash in a SPAC merger
| than in an IPO, there's still some risk." [2]
|
| [1]
| https://www.bloomberg.com/opinion/articles/2020-07-30/kodak-...
|
| [2]
| https://www.bloomberg.com/opinion/articles/2020-07-14/everyo...
| HNfriend234 wrote:
| I invest in SPACs regularly and have made a killing off investing
| in them. Plain and simple, SPACs are all about hype in terms of
| how much hype the target company can garner. I only buy pre-LOI
| SPACs and then consider selling them on the merger announcement
| or right before the merger completes.
|
| This strategy works because of social media. People go around
| social media to hype up the company so to a certain extent it is
| a giant pump and dump scheme but the pumping is done by the
| collective internet communities on social media.
|
| Typical aspects of the company don't matter. What matters is
| being able to hype the company. That's why stuff like electric
| vehicle makers, fintech and clean energy is stuff that everyone
| focuses on. Right now the average joe strongly believes that
| electric cars and clean energy are the future so they're more
| likely to buy into these SPAC companies because they're sold as
| "the next big thing" even though the reality could be that
| they're very risky but no one cares about that long-term because
| we all dump the SPAC shares before the merger completes anyways.
| babyshake wrote:
| Is there a good place to get a feed/alert/calendar on LOIs,
| announcements and merger completion without a bunch of other
| noise?
| [deleted]
| ashika wrote:
| >but no one cares about that long-term
|
| indeed. and i congratulate you on your recent success in
| predicting the tastes of others who buy equities based on
| speculative price action. spac management likely makes their
| decisions largely focused on share price, which i suppose as an
| equity investor would feel like they have your back. but when
| you consider the role equity is meant to play in corporate
| finance, you would concede that in an ideal world management
| would not pay attention to share price at all, they would be
| working on making the most money possible using the assets and
| equity they already had, and then either returning or
| reinvesting those profits. the equity markets will always have
| a chaotic bent in the short term, so we should be careful of
| the ways we let them influence policy. its really a circular
| dependency if you think about it.
| dasm wrote:
| It seems you are implying that this sort of arrangement is
| fundamentally unhealthy for a market focused on accurate
| price discovery, and I think that's trivially true.
|
| Some investing incentives are aligned with accurate price
| discovery, some are not (warren buffet vs a pump and dump).
| [deleted]
| ashika wrote:
| and dont get me wrong, i am glad all types exist and meet
| in the market.
|
| what i am implying above is that i view a management team
| that makes decisions based on share price as about as
| delusional as one that drinks its own urine for power ahead
| of important meetings.
| dontreact wrote:
| Dumb question: how do you decide which SPACs to buy if it's
| before the LOI and you can't figure out what company they will
| be hyping?
| vasco wrote:
| Not OP but have researched a few. If you're following the
| hype train as OP suggests, management team is really the only
| thing you have going for you. SPACs have specific rules about
| what they can disclose, so they won't be able to tell you in
| advance which company they'll have as a target. Usually it
| boils down to the industries the management team has worked
| in before as well as previous SPACs they may have ran
| successfully till merger.
| wtf_is_up wrote:
| Look for SPACs close to NAV and plant some seeds. You can
| almost consider these cash accounts since they won't go much
| below NAV pre-merger so there is a window of assymmetric
| risk. Once a target is in place you can do research and
| decide if you want to adjust. Not everything skyrockets after
| target is revealed. Canoo and Utz were less sexy plays that
| paid off and were easily researchable.
|
| If you're just chasing hype, you buy one of Chamath's myriad
| of SPACs and trust in his ability to pimp himself at every
| opportunity.
| dasm wrote:
| Effective strategy. It seems your edge comes from 1. learning
| about SPACs early and 2. identifying which ones will be
| successful. How do you get #1?
| hattmall wrote:
| Look at the IPO calendar. Most IPOs are SPACs.
| whymsicalburito wrote:
| Do you have any tips on good screeners or places to find these
| SPACs? I've never invested in them yet and don't know too much
| about them. Are they traded just like regular stocks?
| hattmall wrote:
| Spachero.com
|
| I look for them close to NAV don't like buying much out from
| there. The current best opportunities I see are, FPAC, TWCT,
| AACQ. They are priced well and should move when rumours come
| out. If you want one a little bit riskier but with a
| potentially sooner payoff, FUSE, rumoured to merge with Money
| Lion.
|
| If your into options, SPACs with options create some great
| opportunities for Call Debit Spreads instead of having to buy
| commons and front the $10 redemption value.
|
| There's also warrants which have more risk. FPAC+ and TWCTW
| are in my mind the best current warrants.
|
| There is also Units! The best unit play right now I see is
| COOLU, its due to split soon and you will get one common and
| 1/3 of a warrant per unit, so buy in multiples of 3.
|
| All of the tickers I mentioned are tech focused and backed by
| VC firms with a history of successful tech companies and
| SPACs.
|
| There are a lot of garbage SPACs so you have to be careful.
|
| Overall, your number one source for information should be SEC
| filings on Edgar. Read the documents there, research the
| management team, learn what the target payouts are and see
| who else is buying in.
|
| SPACs are great and should last through the fall, the
| exchanges are looking at making direct listing much easier
| though and that will kill SPACs and probably be the move the
| pops the bubble.
|
| The good thing about SPACs is that you have a focused
| management team of seasoned investors and you are investing
| with them and have the redemption price of $10 typically if
| there is a problem.
| icedchai wrote:
| A SPAC is just a stock like any other. If you look for
| investor videos on YouTube, you'll find the same SPACs being
| pumped, both in pre-merger and post-merger form. There is
| also a SPAC ETF ("SPAK") that holds a bunch of them.
| exogeny wrote:
| I don't know how not to make this a personal judgment, but I
| hate this shit with a passion.
|
| Edit: For the sake of clarity, what I hate is the amount in
| which influencers and social media impact the market.
| stevievee wrote:
| This has been my investing thesis on SPACs as well. While it
| may be obvious to most investors, comments like this that share
| the idea will make it harder for me to get in early. Selfish, I
| know.
| vtantia wrote:
| Whenever you have some instrument attacking Wall Street (in this
| case, the IPO itself), papers come out trying to protect them.
| This does not mention drawbacks of the IPO the SPAC is getting
| rid of - the 6-7% investment banking fee, the hassle of doing
| several roadshows, the near 100% IPO pop due to which the company
| raises half of what it would have (amounting to a 50% fee so to
| say which goes into the pockets of institutional investors) amid
| other things. It is sad that critical reasoning is dead on HN.
| Nothing is ever purely good or purely bad. An impartial cost-
| benefit analysis needs to be done which is sadly impossible for
| someone whose funding comes from the deep pockets of Wall Street
| and institutional investors.
|
| I have not even begun diving into the benefits of SPACs - some of
| which are the opportunity for audacious bets like Virgin Galactic
| holdings which Wall Street would assume to be a loss making
| company, benefits of PIPEs in SPACs (which would be the topic for
| a whole new post), the speed of going public.
| supercanuck wrote:
| > It is sad that critical reasoning is dead on HN
|
| What?
|
| > An impartial cost-benefit analysis needs to be done
|
| >I have not even begun
|
| >... Wall Street would assume
|
| It would seem irony is not dead.
| vtantia wrote:
| Look at the comments below which mention 1 bullet point and
| do not look holistically at the problem and the solution. I
| have been finding this to be the case on a lot of HN comments
| recently
|
| I do not claim to be making an impartial analysis myself.
| Just putting out some points which have been omitted by the
| Wall Street-funded academic paper
| andylei wrote:
| > by the Wall Street-funded academic paper
|
| citation needed
| vtantia wrote:
| Good point. Unfortunately, I couldn't find where their
| funding comes from from a quick cursory search (and I
| don't just mean the funding for graduate students, or
| salaries). If anyone could provide details about this, I
| would much appreciate it
| goat_whisperer wrote:
| >An impartial cost-benefit analysis needs to be done which is
| sadly impossible for someone whose funding comes from the deep
| pockets of Wall Street and institutional investors.
|
| The link is to an academic paper that literally performs an
| impartial cost-benefit analysis of SPACs based on publicly
| available information, and concludes that the way SPACs are
| currently structured are a pretty crap deal apart from those
| who are able to get in early.
|
| You mention underwriting fees, and the paper makes a big
| emphasis to emphasize the implicit costs of SPACs (i.e. all of
| the dilution) that people ignore.
|
| Also, I'm not sure where the idea comes that SPACs are 'anti-
| wall street'. The sponsors and investors are some of the
| largest Wall Street Institutions out there (large Hedge Funds)
|
| However, there are different ways of doing SPACs and the paper
| mentions a recent SPAC that gets rid of some of the excesses
| that end up screwing over the post-merger investors
| klipt wrote:
| I'm pretty sure "anti-wall street" is just the financial
| version of "doctors hate him", i.e. clickbait. Last week it
| was buying into the GME bubble that was marketed as "anti-
| wall street" and look how that turned out.
| cinntaile wrote:
| If you have better or different sources explaining how SPACs
| work and what their effects are I am all ears.
| jartelt wrote:
| The fees and dilution companies take on when doing a SPAC are
| typically higher than if they had done an IPO. SPACs also can
| and often do pop up just like IPOs.
|
| When you go with a SPAC you are basically paying more fees in
| exchange for a faster route to go public and more price
| certainty. In most cases high flying companies with great
| numbers are better off doing a direct listing or IPO than a
| SPAC.
| neximo64 wrote:
| As opposed to the 20% tax free, dilutive!! fee that goes to the
| SPAC sponsor for a finders fee
| vmception wrote:
| The market is telling you what you should be putting your
| time on and here you are in the comments section envisioning
| a fake controversy instead
| dhnajsjdnd wrote:
| Wall Street underwriters are making tons of money on SPACs:
| https://www.wsj.com/articles/spacs-rescued-wall-street-from-...
| vtantia wrote:
| That is a good point but this is temporary. SPAC lords will
| reduce these margins soon enough. It is in their direct
| incentive to do so. This is a speculative assertion by me
| (one that I'm quite confident about), but I'm not sure one
| can be certain about the future
| sriram_sun wrote:
| If a "promising startup" uses SPAC money to go from series B to
| public, that would be a good proposition for the public.
| Something like 23 and Me after seed round F has already been
| picked clean even before they enter the public markets!
| foxhop wrote:
| Checkout UWMC for a long term SPAC play.
| abledon wrote:
| I know its high risk... but some of those space oriented SPACs
| are just so tantalizing, anything to get closer to investing in
| SpaceX...
| blackearl wrote:
| Space industry will a money black hole for a while longer IMO.
| I suppose it didn't really matter to every other disruptive
| startup so maybe stocks only go up /s
| bartc wrote:
| SPAC seems preferable for companies with an inexperienced board
| or who are trying to hide something from the public before
| listing their stock.
|
| I imagine SpaceX will eventually go public via more traditional
| means and there's a good chance it's the first trillion dollar
| IPO IMHO.
| Rebelgecko wrote:
| If you want to invest in SpaceX, Fidelity has some funds that
| are basically S&P500+SpaceX. SpaceX is a small percent of the
| funds (like 0.5%), but if you were gonna invest in
| Apple/Facebook/Amazon/Visa anyways that's not the end of the
| world
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